The global financial crisis has claimed its fair share of victims so far, but it is also offering banks an opportunity to catch up with established rivals.
In the case of Société Générale, it has enabled the bank to accelerate its build-up in fixed income to complement its respected equity derivatives franchise.
“The bank is looking at a balanced model of income coming from different areas of markets, so it means being equally strong in equity derivatives and fixed income,” says Robert Reilly, SocGen’s recently appointed co-head of flow fixed income and currencies in Asia. “The ambition is to be a top-10 FX provider globally.”
As part of that, it has grown its fixed income and currencies flow business in Asia aggressively. Reilly was promoted and transferred from Sydney, where he was managing director of rates trading, to oversee trading, while Adam Reynolds has moved from Merrill Lynch to be co-head of the division and take care of sales.
“We came late to the party, but the global financial crisis has given us the opportunity to hire high calibre staff…some of which have come from [bulge bracket firms],” says Reilly. “At the beginning of the year I was only one of three on FIC [fixed income and currencies] flow based in Hong Kong and now we have a team of about 30 here and a total of 50 across the region.”
Reilly believes that SocGen has some strong competitive advantages in the present climate with a relatively strong balance sheet and credit rating.
Its global footprint and 24-hour operations mean it can warehouse and offload risk at any time as well. In Asia, it is onshore in Hong Kong, Japan, South Korea and Taiwan and can trade most interest rates and currency derivatives.
SocGen’s traditional strengths in derivatives can be extended to fixed income. “We are a derivatives house and have robust systems and quantitative skills, which allows us to analyse the risk on these instruments better than most,” says Reilly. “With derivatives, you’re talking about [spreads] of a fraction of a basis point and so you need to be able to capture and measure that risk, and not lose any of it along the way.”
By the end of 2010, SocGen’s ambition is to rank in the top five in Asia for emerging markets rates and foreign exchange flow trading and FX forwards.
The bank returned to the black in the second quarter with €309 million (US$445 million) in net profit, compared with a first-quarter loss of €278 million. However, this represents a 52% year-on-year drop in profits.
Separately, SocGen’s corporate and investment banking division announced the appointment of José-Antonio Olano as its Asia-Pacific head of loan syndicate and distribution.
He will be based in Hong Kong, having relocated from Madrid, where he has been heading the bank’s loan syndicate team since 2006.